Acct 200 Lecture 2Outline of Last Lecture I. Types of business entitiesOutline of Current Lecture II. General Accounting TermsA. Definition of assets, liabilities, owner's equity, paid-in-capital, retained earnings, revenue, expenses, net income, dividendsIII. Who makes the rules: SEC, PCAOB, IFRSIV.Balance Sheet components vs Income Statement componentsV.Assets and Liabilitiesa.Accounting EquationCurrent LectureAssets: economic resources expected to be of future benefit to businesses (increase as debt)Liabilities: economic claims against the business assets made outside the business (increase as credit)Owner's Equity: residual claims against assets of the business. Amountleft over after assets havebeen used to cover liabilities. (increase as credit)Retained earnings: net income of firm minus all dividends by owners (increase as capital)Revenue: company provides a good or service to another (increase retained earnings)Expenses: using up an asset or receipt of service from another entity. (decrease retained earnings)Net income: revenues-expenses for a given time periodDividends: payment to the owners of a corporation that provides a return on investment (decrease retained earnings)SEC: the SEC turned over the process of making rules to various groups of private sector professionals. Essentially, the watch dog over the stock market.These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.PCAOB: in 2002, Congress gave them the right to make rules. The Public Company Accounting Oversight Board. They make sure auditors do their job.IFRS: responsible for getting the entire world on one standard. (Mason's example, like getting the entire class to agree on one place to go for lunch)Components of a Balance Sheet: A balance sheet consists of assets, liabilities, owner's equity.Assets: what you OWNLiability: something you owe (bank loan, car loan, etc)Net income: the same thing as a profit.Revenue: the income streamExpenses: comes out of revenue. (If you have revenue, then you have expenses)**Anything not on the income statement is on the balance sheet-NOT BOTH**Components of an Income Statement: Anything with the word revenue or expense. (Examples: advertising expense, rent expense, service revenue)Assets and Liabilities: MOST IMPORTANT EQUATIONAssets = Liabilities + Owner's